A product has a contribution margin of 20% and sells for $100.00 per unit. Assuming fixed costs of $2 million and a goal to have an EBIT of $1 million, how many units of the product must be sold?
A)100,000 units
B)50,000 units
C)120,000 units
D)150,000 units

Question

Quizplus · Accepted Answer

To find the number of units needed to achieve the desired EBIT, we use the formula: (Fixed Costs + Target EBIT) / Contribution Margin per Unit. The contribution margin per unit is 20% of $100, which is $20. Therefore, ($2,000,000 + $1,000,000) / $20 = 150,000 units.

A Product Has a Contribution Margin of 20% and Sells